Posted on 04/01/2010 12:29:26 PM PDT by george76
Just days after becoming controller of financially strapped Harrisburg, Pa., in January, Daniel Miller began uttering an obscure term that baffled most people who had never heard it and chilled those who had: Chapter 9.
The seldom-used part of U.S. bankruptcy law gives municipalities protection from creditors while developing a plan to pay off debts.
Created in the wake of the Great Depression, Chapter 9 is widely considered a last resort and filings under it are more taboo than other parts of bankruptcy code because of the resulting uncertainty for everyone from municipal employees to bondholders.
(Excerpt) Read more at online.wsj.com ...
Can they throw out union labor contracts and retirement plans?
...hmmm....isn’t Harrisburg the state capital?....not good for a state capital to go bust...especially a rich state like PA
My understanding is that, yes, debtors in a bankruptcy proceeding effectively can re-open and renegotiate contracts. A weighted majority of the secured and unsecured creditors must approve any final plan for emerging from bankruptcy, and typically employees are not SECURED creditors, although that gets dicey due to vested pension/ retirement/ health benefits.
Hey, Obama literally stole a TON from GM and Chrysler bond holders. So what’s the big deal? Isn’t Big Brother ALLOWED to steal from the serfs?
Six week old story. I would be interested in a more recent snapshot of Harrisburg.
In Harrisburg, which is Pennsylvania’s capital and has a population of about 47,000, a March 1 deadline is looming on a payment of $2 million out of the $68 million due this year for the financing of an incinerator plant. The facility has about $288 million in overall debt.
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Mkay. 68 million divided by 47 thousand is $1446 per resident, man, woman and child. Not taxpayer. Resident. I don’t know what the lunatic Democrats that run Harrisburg were thinking (it’s the capital of PA by the way) . . . but . . . they are nuts.
WSJ: “U.S. bankruptcy judge Michael McManus, as the National law Journal reported last March, “held the city of Vallejo, Calif., has the authority to void its existing union contracts in its effort to reorganize.”
But when it came to voiding those contracts on pensions—a major driver of public expenses—the city blinked. The “workout plan” the city approved in December calls for cuts in services, staff and even some benefits, such as health benefits for retirees. However, it does not touch public-employee pensions. Indeed, it increases the pension contributions the city pays.”
Harrisburg, which is Pennsylvania’s capital ...
“Bankruptcy is inevitable,” Mr. Miller says. “We are in a terrible bind.” A budget passed Saturday by Harrisburg’s city council didn’t include any funds to cover the debt payments.
Mr. Miller, Harrisburg’s controller, also sees no way out of the financial squeeze. The city’s per-capita debt of $9,500 is the highest in Pennsylvania and triple the debt load of Philadelphia, he says. And selling parking facilities or other properties in a fire sale would cost Harrisburg future revenue.
“We can’t raise taxes; they’re already very high,” Mr. Miller says. “If we did, people would just leave. It’s cheaper to move out to the suburbs.”
http://finance.yahoo.com/taxes/article/108866/muni-threat-cities-weigh-chapter-9
The draft agreement with Assured Guaranty Municipal Corp. would give the city and the other local entities exposed to the debt — including Dauphin County and the Harrisburg Authority, the incinerator’s owner — 90 days to hammer out a long-term plan to deal with the facility’s $282 million in debt
I find this very aggravating that the city does not have a solution to its problem. This has been known for several months. Naturally, the creditors may not have taken anything that was offered by the city in the past.
It will make it a lot easier for governments to fund their outrageous pension obligations if they don’t have to pay their bondholders.
Can a state, such as California, use Chapter 9?
I am not a lawyer.
This is new terrority for many of us.
Here is another view [he may be wrong ?}:
http://www.infowars.com/46-of-50-states-could-file-bankruptcy-in-2009-2010/
use ch 9 to toss the labor contracts and pay bond holders as secured.
hmmm defunding the SEIU.
what happens when mandatory union payments are no longer mandatory?
Sounds like one heck of a lot of debt for an incinerator plant. I can't imagine how an incinerator plant could possibly cost $288 million to build...maybe there's more to the plant than just an incinerator. There better be or else Harrisburg screwed up big time.
I would think CA could use Chapter 9 in a total fiscal meltdown. More likely, however, is that the next governor ends up merely threatening all interest groups with Chapter 9 as a strategy to gain budget cuts and concessions from the state employee unions. The mere threat of contract cancellations could be all it takes to get all the interest groups to listen to reason.
On the plus side, they only need half as much landfill space.
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